High Court finds there is no power to stay in favour of prior proceedings in non-EU court where there is an English non-exclusive jurisdiction agreement

The High Court has held that where there was a non-exclusive jurisdiction clause in favour of an EU member state (England), and proceedings were commenced first in a non-member state (the Isle of Man), the English court had no power or discretion to decline jurisdiction: UCP Plc v Nectrus Limited [2018] EWHC 380 (Comm).

The recast Brussels Regulation contains new powers (under articles 33 and 34) to stay proceedings in favour of a non-member state where the non-member state proceedings are first in time. The court held that those provisions do not apply where jurisdiction is taken on the basis of a jurisdiction clause, even if the clause is non-exclusive.

Assuming the same approach is adopted in other cases, this will mean a party can insist on pursuing proceedings in a member state under a (non-exclusive) jurisdiction agreement, even where there are already proceedings in a non-member state which are not in breach of the jurisdiction clause.

The decision has potentially broader implications. If the judge is correct and the only power to stay in favour of a non-member state is where the facts come within article 33 or 34, this will mean there is no discretion to stay in other circumstances. So, where the proceedings in the non-member state were second in time, the English court could not defer to that court presumably even if there was an exclusive jurisdiction clause in favour of the non-member state or the proceedings concerned eg foreign land. Before the recast Brussels Regulation entered into force, the English courts held on a number of occasions that they had the power to stay in these circumstances – see for example the discussion in Plaza BV v The Law Debenture Trust Corporation [2015] EWHC 43 (Ch) (post) and Ferrexpo AG v Gilson Investments Ltd [2012] EWHC 721 (Comm) (post). If UCP is correct and there is now no power to do so unless the non-member state proceedings are first in time, the only residual power the court will presumably have is to stay on case management grounds in “rare and compelling cases” (as in Reichold Norway SA v Goldman Sachs International [1999] 1 All ER (Comm) 40).

In the present case the court also considered, obiter, that even if the common law had applied, given the non-exclusive jurisdiction clause, strong, or possibly very strong, reasons would be required to displace the English proceedings.

Background

The procedural background is complicated, but in simplified terms and so far as relevant, Nectrus, a Cypriot company, commenced proceedings in the Isle of Man seeking payment of sums withheld by UCP, an Isle of Man company, on the sale of a company, Candor. UCP then commenced proceedings in England claiming that Nectrus was in breach of an Investment Management Agreement (IMA), the loss being the amount by which the sale consideration of Candor had been reduced, hence the amount withheld on its sale.

The IMA contained a non-exclusive jurisdiction agreement in favour of the English courts. UCP disputed the jurisdiction of the Manx court, but in the event the proceedings continued, indicated they would raise the cause of action relied on in the English proceedings by way of equitable set off. Nectrus disputed their right to do so.

Nectrus disputed the jurisdiction of the English court on the basis that the Manx courts were the most appropriate forum to determine the dispute and were first in time.

Decision

The High Court (Cotterill J) rejected the jurisdiction challenge and refused to stay the proceedings.

Recast Brussels Regulation

The judge began by stating that the non-exclusive jurisdiction agreement in the IMA came within article 25 of the recast Brussels Regulation, as that article applies to jurisdiction clauses in favour of EU member states, regardless of the domicile of the parties.

There are provisions in the Regulation (articles 33 and 34) which give member state courts a discretion to stay in favour of proceedings in a non-member state in certain circumstances. However, these articles only expressly apply where the foreign proceedings are first in time and the member state court has jurisdiction based on article 4 (domicile of the parties) or articles 7, 8 and 9 (which include the contract and tort grounds). In other words, article 25 is not referred to in articles 33 and 34.

The judge considered that the inference to be drawn in those circumstances was that there is no discretion to decline jurisdiction in cases outside of the circumstances set out in articles 33 and 34, in particular where the member state court’s jurisdiction is founded under article 25.

This meant that even though the proceedings brought in the Isle of Man were not in breach of the jurisdiction clause – as English jurisdiction was only non-exclusive – UCP could insist on the English proceedings going ahead.

Common law

The judge went on to consider the common law arguments, for the sake of completeness, although her comments are obiter given her findings on the Regulation.

She first held that the Isle of Man was not an available alternative forum, given Nectrus’s position that the subject matter of the English proceedings could not be relied on in the Manx proceedings by way of set off.

Even if the Isle of Man were available, the authorities suggested that the non-exclusive jurisdiction clause in favour of England meant strong, or perhaps very strong, reasons were required for English jurisdiction to be displaced.

The existence of the Manx proceedings carried very little weight, as they were foreseeable at the time of contracting. The Manx proceedings were also at a very early stage.

Overall the judge concluded that Nectrus did not come close to establishing even strong reasons for a stay of the English proceedings given the non-exclusive jurisdiction clause.

Archives

Archives

The articles published on this website, current at the dates of publication set out above, are for reference purposes only. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action.